Mainstream news outlets are already starting to use the phrase “economic collapse” to describe what is going on in some areas of our world right now. For many Americans this may seem a bit strange, but the truth is that the worldwide economic slowdown that began during the second half of last year is starting to get a lot worse. In this article, we are going to examine evidence of this from South America, Europe, Asia and North America. Once we are done, it should be obvious that there is absolutely no reason to be optimistic about the direction of the global economy right now. The warnings of so many prominent experts are now becoming a reality, and what we have witnessed so far are just the early chapters of a crushing economic crisis that will affect every man, woman and child in the entire world.
Let’s start with Brazil. It has the 7th largest economy on the entire planet, and it is already enduring its worst recession in 25 years. In fact, at the end of last year Goldman Sachs said that what was going on down there was actually a “depression“.
But now the crisis in Brazil has escalated significantly.
I want to share with you an excerpt from a recent article entitled “Brazil: Economic collapse worse than feared“. I know, that title sounds like it comes directly from The Economic Collapse Blog, but I didn’t write it.
Amid political chaos, Brazil’s economic collapse is worse than its government once believed.
In the midst of rising calls to impeach President Dilma Rousseff, Brazil’s central bank announced Thursday that it now expects the country’s economy to shrink 3.5% this year.
That’s worse than the central bank’s previous estimate for a 1.9% contraction. The darker forecast matches what the International Monetary Fund projected for Brazil — Latin America’s largest country — and what many independent economists have suspected.
It is one thing for Michael Snyder to tell you that Brazil is in the midst of “economic collapse”, but it is another thing entirely for CNN to say it.
Meanwhile, things are actually much worse in Venezuela than they are in Brazil. Food and basic supplies are in short supply, the inflation rate has hit 720 percent, and crime is completely out of control.
The only question now is whether Venezuela’s government or economy will completely collapse first.
The key word there is “completely.” Both are well into their death throes. Indeed, Venezuela’s ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it’s hard to see that getting any better for them any time soon — or ever.
Incumbents, after all, don’t tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It’s no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.
Once again we see a very respected mainstream publication using the phrase “economic collapse” to describe what is happening in South America.
You can find some stunning video of the “economic Armageddon” that is taking place in Venezuela right here. I would encourage you to watch that video, because what is happening down there will eventually be happening here.
Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.
Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.
Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.
As Italy descends into financial chaos, the rest of the continent better be paying attention.
Do you remember how hard it was for the rest of Europe to rescue Greece?
Well, Greece has the 44th largest economy on the planet.
Italy has the 8th.
It would be hard to overstate the seriousness of what is going on over in Europe, and it is not just Italy we are talking about. All over the continent major banks are in deep trouble, and the chairman of France’s second largest retail bank recently told reporters that “I am much more worried than I was in 2009“.
And there is very good reason for concern. On Sunday, we learned that a major “bail-in” had just been announced for one of Austria’s most prominent banks. The following comes from Zero Hedge…
And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.
Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:
a 100% bail-in for all subordinated liabilities,
a 53.98% bail-in, resulting in a 46.02% quota, for all eligible preferential liabilities,
the cancellation of all interest payments from 01.03.2015, when HETA was placed into resolution pursuant to BaSAG,
as well as a harmonisation of the maturities of all eligible liabilities to 31.12.2023.
According to the current resolution plan for HETA, the wind-down process should be concluded by 2020, although the repayment of all claims as well as the legally binding conclusion of all currently outstanding legal disputes will realistically only be concluded by the end of 2023. Only at that point will it be possible to finally distribute the assets and to liquidate the company.
The dominoes are starting to fall in Europe, and I would expect even bigger announcements in the weeks and months to come.
Over in Asia, economic chaos is beginning to prevail as well.
In China, the stock market is already down more than 40 percent from the peak, Chinese exports were down 25.4 percent on a year over year basis in February, and Chinese economic numbers overall have not been this poor since the depths of the last global recession.
Here in the United States, we haven’t been hit quite as hard as the rest of the world just yet, but there are lots of very disturbing warning signs all around us.
At the end of last week, we learned that it is being projected that U.S. GDP will have grown by just 0.1 or 0.2 percent during the first quarter of 2016. And on Monday corporate earnings reporting season begins, and it is expected to be a very, very bad one. The following comes from Business Insider…
We are about to get confirmation that earnings growth for America’s biggest companies was negative in the first quarter, compared to the same period a year ago.
When aluminum giant Alcoa releases its results on Monday, it will mark the unofficial start of the heaviest reporting season for S&P 500 companies.
The final scoreboard is expected to show a 9.1% earnings drop for the quarter, according to FactSet senior earnings analyst John Butters.
If these projections turn out to be accurate, it will be the fourth quarter in a row of earnings declines. This is something that we never see outside of a recession.
Of course I am just another voice in the crowd when it comes to predicting that the U.S. economy is headed for rough times. For example, just check out what Societe Generale economist Albert Edwards is saying…
A tidal wave is coming to the US economy, according to Albert Edwards, and when it crashes it’s going to throw the economy into recession.
…the profit recession facing American corporations is going to lead to a collapse in corporate credit.
“Despite risk assets enjoying a few weeks in the sun our fail-safe recession indicator has stopped flashing amber and turned to red”
Whole economy profits never normally fall this deeply without a recession unfolding. And with the US corporate sector up to its eyes in debt, the one asset class to be avoided — even more so than the ridiculously overvalued equity market — is US corporate debt. The economy will surely be swept away by a tidal wave of corporate default.
As you can see, it isn’t just one nation or one region of the world that we need to be concerned about.
Economic chaos is erupting literally all over the planet, and global leaders are starting to panic.
Unfortunately, they have had seven years to try to fix things since the last global recession, and they didn’t get the job done. Anyone that believes that by some miracle they will be able to pull us out of the fire this time and that everything will somehow be okay is simply engaged in wishful thinking.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
In 1960, the city of Detroit was the greatest manufacturing city that the world had ever seen. Nearly two million people lived there, and it had the highest per capita income in the United States. That may be hard to believe, because today it actually has one of the lowest per capita incomes of all of our major cities. Over the decades more than a million people have left the city, and thousands of abandoned homes have been torn down. But there are still tens of thousands of abandoned dwellings that remain standing, and some have sold for as little as one dollar in recent years. Once Detroit was the envy of the entire planet, but now it has become a global joke and in other countries they love to do news stories about “the ruins of Detroit” to show how rapidly America is rotting and decaying. Sadly, Detroit is far from alone, because there are other formerly great manufacturing cities that have declined just as fast as Detroit has.
Earlier today, I came across a video that contains footage that someone recently captured as they drove through the city of Detroit at night. To say that the footage is disturbing would be a tremendous understatement…
It has become known as a mecca of violent crime and poverty, and now a viral video is giving an unpleasant view of Detroit after dark.
The clip, called Driving through Detroit at night, was filmed by a woman who was a passenger in a car going around the Motor City and was posted to Twitter at the weekend.
It shows terrifying scenes of gangs gathered on the sidewalk, prostitutes lifting up their skirts and dancing, and even a man being run over by a car on purpose.
I would have liked to share the video with you all, but it is just way too graphic. There really are prostitutes lifting up their skirts in the video, and a man really is hit by a vehicle. If you want to watch it for yourself, it is very easy to find on YouTube. But please be warned that children should not be watching this.
If you live in a peaceful rural or suburban setting, the kind of behavior displayed in this video may seem very foreign to you. In America today, it is way too easy to allow our televisions to define reality for us. But the warped view of reality that we get through our televisions is nothing like the real world. The real world is cold, cruel and very unforgiving.
If you are in the wrong place at the wrong time, the real world will eat you alive.
In the city of Detroit today, close to half the population is functionally illiterate, and one survey found that 60 percent of all children in the city are living in poverty. It has been reported that 40 percent of the street lights do not work, and as you can see from the video it is a very frightening place to be after dark.
And don’t count on the police to help you. The size of the police force in Detroit has been reduced by about 40 percent over the years, and it has been estimated that it takes the Detroit police an average of 58 minutes to respond to a call.
If it was just one major city where all of these things were happening, that would be bad enough.
Sadly, the truth is that what is happening in Detroit is happening all over the nation. In fact, St. Louis and Memphis now have higher gun crime rates than Detroit does…
The listing places St Louis above the notoriously dangerous Detroit which has topped the list in previous years thanks to the city’s high gun crime rate.
Detroit is now listed as third after Memphis, Tennessee which had 84.2 violent crimes per 10,000 residents.
Birmingham, Alabama comes in fourth place with 82.8 violent crimes per 10,000 residents while Rockford, Illinois was fifth with a rate of 76.3.
The call log on the store stretches 126 pages, documenting more than 5,000 trips over the past five years. Last year police were called to the store and three other Tulsa Walmarts just under 2,000 times. By comparison, they were called to the city’s four Target stores about 300 times. Most of the calls to the northeast Supercenter were for shoplifting, but there’s no shortage of more serious crimes, including five armed robberies so far this year, a murder suspect who killed himself with a gunshot to the head in the parking lot last year, and, in 2014, a group of men who got into a parking lot shootout that killed one and seriously injured two others.
Police reports from dozens of stores suggest the number of petty crimes committed on Walmart properties nationwide this year will be in the hundreds of thousands.
Did you catch that?
This Bloomberg report says that there will be “hundreds of thousands” of crimes just committed at Wal-Mart stores alone this year.
If people are behaving like this while times are still relatively stable and relatively good, what would things look like during a real crisis?
Many people openly wonder what happened to Detroit, but it really isn’t much of a mystery at all.
Over the decades, our politicians have stood idly by as tens of thousands of businesses and millions of good paying jobs have left the country. Our economic infrastructure has been absolutely gutted, and as a result formerly great manufacturing cities have become rotting, decaying hellholes.
And it certainly doesn’t help that voters in many of these cities have willingly chosen to put radical leftists into power time after time.
Unfortunately, it appears that the nation as a whole is about to hand the keys to the White House to a radical leftist that has a violent temper that is absolutely legendary. If she gets into power, that might just be the final nail in our coffin.
What has already happened to Detroit is slowly happening to the entire country, but we never seem to learn from our past mistakes.
So now we will suffer the consequences for our very foolish decisions, and it will not be pretty.
Most of us have never witnessed an economic “recovery” this bad. As you will see below, the average rate of economic growth since the last recession has been the lowest for any “recovery” in at least 67 years. And unfortunately, the economy appears to be slowing down even more here in 2016. On Friday, I talked about how the U.S. economy grew at a painfully slow rate of just 1.2 percent in the second quarter after only growing 0.8 percent during the first quarter. And last week we also learned that the homeownership rate in the United States has dropped to the lowest level ever. This is not what a recovery looks like. Instead, it very much appears that a new economic downturn has already begun.
Even seven years after the recession ended, the current stretch of economic gains has yielded less growth than much shorter business cycles.
In terms of average annual growth, the pace of this expansion has been by far the weakest of any since 1949. (And for which we have quarterly data.) The economy has grown at a 2.1% annual rate since the U.S. recovery began in mid-2009, according to gross-domestic-product data the Commerce Department released Friday.
The prior expansion, from 2001 through 2007, was the only other business cycle of the past 11 when the economy didn’t grow at least 3% a year, on average.
Now, the auto sector, which has propped up GDP growth for years, is slowing down. For the first six months, total car and light truck sales, at a seasonally adjusted annual rate (SAAR) of 17.5 million vehicles, are lagging behind last year by 100,000 units. Over the first half, fleet sales to rent-a-car companies and big fleet buyers were up industry wide. But retail sales fell 2%.
All over the corporate world, earnings are down.
In some cases, they are way down.
It is being projected that this will be the fifth quarter in a row when corporate earnings have declined, and even mainstream analysts are now admitting that it is “evident” that we have entered “a global slowdown”…
“Earnings season in the U.S. confirms the overall macro picture that we have. We have a global slowdown. It’s evident in all of the major economies,” said Peter Garnry, head of equity strategy at Saxo Bank, on a Bloomberg podcast.
Of course I have been saying this exact thing for the past 12 months, but a lot of people have tuned me out because the stock market in the United States has been doing so well.
But the stock market is not an accurate barometer for the real economy. It never has been, and it never will be.
If stocks accurately reflected the health of the U.S. economy, they would have already crashed really hard a long time ago. At this moment, stock prices are completely disconnected from economic reality, and this has many of the most respected names on Wall Street scratching their heads. One of them is Jeffrey Gundlach, the chief executive of DoubleLine Capital. Just check out what he told Reuterson Friday…
Noting the recent run-up in the benchmark Standard & Poor’s 500 index while economic growth remains weak and corporate earnings are stagnant, Gundlach said stock investors have entered a “world of uber complacency.”
The S&P 500 on Friday touched an all-time high of 2,177.09, while the government reported that U.S. gross domestic product in the second quarter grew at a meager 1.2 percent rate.
“The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview. “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”
So when he says that the stock market “should be down massively” and that it is time to “sell everything”, we should all take him very, very seriously.
All throughout history, a huge decline in corporate earnings has almost always resulted in a huge decline in stock prices. As Jesse Felder has noted, “we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices” during the last 50 years.
To any rational observer, it is quite obvious that stock prices should have already started collapsing quite some time ago.
And to a large extent this has already happened around the planet, but here in the United States stocks continue to defy the laws of economics.
But at this point it isn’t going to do much good to warn people about this. Those that could see the danger coming have already pulled their money out of stocks, and most of those that want to stick their heads in the sand and pretend that things are somehow going to be different this time are not likely to be persuaded this late in the game.
In the end, we should all be grateful that this absurd financial bubble has lasted for as long as it has, because stability is much more pleasant than instability. The U.S. economy and the U.S. financial system have enjoyed a prolonged period of stability that has defied all the odds, and let us hope that it lasts for at least a little while longer…
On the surface, things seem pretty quiet in mid-July 2016. The biggest news stories are about the speculation surrounding Donald Trump’s choice of running mate, the stock market in the U.S. keeps setting new all-time record highs, and the media seems completely obsessed with Taylor Swift’s love life. But underneath the surface, it is a very different story. As you will see below, the conditions for a “perfect storm” are coming together very rapidly, and the rest of 2016 promises to be much more chaotic than what we have seen so far.
Let’s start with China. On Tuesday, an international tribunal in the Hague ruled against China’s territorial claims in the South China Sea. The Chinese government announced ahead of time that they do not recognize the jurisdiction of the tribunal, and they have absolutely no intention of abiding by the ruling. In fact, China is becoming even more defiant in the aftermath of this ruling. We aren’t hearing much about it in the U.S. media, but according to international news reports Chinese president Xi Jinping has ordered the People’s Liberation Army “to prepare for combat” with the United States if the Obama administration presses China to abandon the islands that they are currently occupying in the South China Sea…
“Chinese president Xi Jinping has reportedly ordered the People’s Liberation Army to prepare for combat,” reports Arirang.com. “U.S.-based Boxun News said Tuesday that the instruction was given in case the United States takes provocative action in the waters once the ruling is made.”
A U.S. aircraft carrier and fighter jets were already sent to the region in anticipation of the ruling, with the Chinese Navy also carrying out exercises near the disputed Paracel islands.
Last October, China said it was “not frightened” to fight a war with the U.S. following an incident where the guided-missile destroyer USS Lassen violated the 12-nautical mile zone China claims around Subi and Mischief reefs in the Spratly archipelago.
Meanwhile, the relationship between the United States and Russia continues to go from bad to worse. The installation of a missile defense system in Romania is just the latest incident that has the Russians absolutely steaming, and during a public appearance on June 17th Russian President Vladimir Putin tried to get western reporters to understand that the world is being pulled toward war…
“We know year by year what’s going to happen, and they know that we know. It’s only you that they tell tall tales to, and you buy it, and spread it to the citizens of your countries. You people in turn do not feel a sense of the impending danger – this is what worries me. How do you not understand that the world is being pulled in an irreversible direction? While they pretend that nothing is going on. I don’t know how to get through to you anymore.”
And of course the Russians have been feverishly updating and modernizing their military in preparation for a potential future conflict with the United States. Just today we learned that the Russians are working to develop a hypersonic strategic bomber that is going to have the capability of striking targets with nuclear warheads from outer space.
Unfortunately, the Obama administration does not feel a similar sense of urgency. The size of our strategic nuclear arsenal has declined by about 95 percent since the peak of the Cold War, and many of our installations are still actually using rotary phones and the kind of 8 inch floppy disks for computers that were widely used back in the 1970s.
But I don’t expect war with China or Russia to erupt by the end of 2016. Of much more immediate concern is what is going on in the Middle East. The situation in Syria continues to deteriorate, but it is Israel that could soon be the center of attention.
Back in March, the Wall Street Journal reported that the Obama administration wanted to revive the peace process in the Middle East before Obama left office, and that a UN Security Council resolution that would divide the land of Israel and set the parameters for a Palestinian state was still definitely on the table…
The White House is working on plans for reviving long-stalled Middle East negotiations before President Barack Obama leaves office, including a possible United Nations Security Council resolution that would outline steps toward a deal between the Israelis and Palestinians, according to senior U.S. officials.
And just this week, the Washington Post reported that there were renewed “rumblings” about just such a resolution…
Israel is facing a restive European Union, which is backing a French initiative that seeks to outline a future peace deal by year’s end that would probably include a call for the withdrawal of Israeli troops and the creation of a Palestinian state. There are also rumblings that the U.N. Security Council might again hear resolutions about the conflict.
For years, Barack Obama has stressed the need for a Palestinian state, and now that his second term is drawing to a close he certainly realizes that this is his last chance to take action at the United Nations. If he is going to pull the trigger and support a UN resolution formally establishing a Palestinian state, it will almost certainly happen before the election in November. So over the coming months we will be watching these developments very carefully.
And it is interesting to note that there is an organization called “Americans For Peace Now” that is collecting signatures and strongly urging Obama to support a UN resolution of this nature. The following comes from their official website…
Now is the time for real leadership that can revive and re-accredit the two-state solution as President Obama enters his final months in office. And he can do this – he can lay the groundwork for a two-state agreement in the future by supporting an Israeli-Palestinian two-state resolution in the United Nations Security Council.
Such a resolution would restore U.S. leadership in the Israeli-Palestinian arena. It would preserve the now-foundering two-state outcome. And it would be a gift to the next president, leaving her or him constructive options for consequential actions in the Israeli-Palestinian arena, in place of the ever-worsening, politically stalemated status quo there is today.
Sadly, a UN resolution that divides the land of Israel and that formally establishes a Palestinian state would not bring lasting peace. Instead, it would be the biggest mistake of the Obama era, and it would set the stage for a major war between Israel and her neighbors. This is something that I discussed during a recent televised appearance down at Morningside that you can watch right here…
At the same time all of this is going on, the global economic crisis continues to escalate. Even though U.S. financial markets are in great shape at the moment, the same cannot be said for much of the rest of the world.
Just look at the country that is hosting the Olympics this summer. Brazil is mired in the worst economic downturn that it has seen since the Great Depression of the 1930s, and Rio de Janeiro’s governor has declared “a state of financial emergency“.
Elsewhere, China is experiencing the worst economic downturn that they have seen in decades, the Japanese are still trying to find the end of their “lost decade”, and the banking crisis in Europe is getting worse with each passing month.
In quite a few articles recently, I have discussed the ongoing implosion of the biggest and most important bank in Germany. But I am certainly not the only one warning about this. In one of his recent articles, Simon Black also commented on the turmoil at “the most dangerous bank in Europe”…
Well-capitalized banks are supposed to have double-digit capital levels while making low risk investments.
Deutsche Bank, on the other hand, has a capital level of less that 3% (just like Lehman), and an incredibly risky asset base that boasts notional derivatives exposure of more than $70 trillion, roughly the size of world GDP.
But of course Deutsche Bank isn’t getting a lot of attention from the mainstream media right now because of the stunning meltdown of banks in Italy, Spain and Greece. Here is more from Simon Black…
Italian banks are sitting on over 360 billion euros in bad loans right now and are in desperate need of a massive bailout.
IMF calculations show that Italian banks’ capital levels are among the lowest in the world, just ahead of Bangladesh.
And this doesn’t even scratch the surface of problems in other banking jurisdictions.
Spanish banks have been scrambling to raise billions in capital to cover persistent losses that still haven’t healed from the last crisis.
In Greece, over 35% of all loans in the banking system are classified as “non-performing”.
Even though U.S. stocks are doing well for the moment, the truth is that trillions of dollars of stock market wealth has been lost globally since this time last year. If you are not familiar with what has been going on around the rest of the planet, this may come as a surprise to you. During my recent appearance at Morningside, I shared some very startling charts which show how dramatically global markets have shifted over the past 12 months. You can view the segment in which I shared these charts right here…
I would really like it if the rest of 2016 was as quiet and peaceful as the past couple of days have been.
Unfortunately, I don’t believe that is going to be the case at all.
The storm clouds are rising and the conditions for a “perfect storm” are brewing. Sadly, most people are not going to understand what is happening until it is far too late.
Over the last two trading days, European banks have lost 23 percent of their value. Let that number sink it for a bit. In just a two day stretch, nearly a quarter of the value of all European banks has been wiped out. I warned you that the Brexit vote “could change everything“, and that is precisely what has happened. Meanwhile, the Dow was down another 260 points on Monday as U.S. markets continue to be shaken as well. Overall, approximately three trillion dollars of global stock market wealth has been lost over the last two trading days. That is an all-time record, and any doubt that we have entered a new global financial crisis has now been completely eliminated.
But of course the biggest news on Monday was what happened to European banks. The Brexit vote has caused financial carnage for those institutions unlike anything that we have ever seen before. Just check out this chart from Zero Hedge…
I knew that things would be bad if the UK voted to leave the European Union, but I didn’t know that they would be this bad.
Prior to all of this, a whole bunch of “too big to fail” banks all over Europe were already in the process of imploding, and now this chaotic financial environment may push several of them into full-blown collapse mode simultaneously. Just consider the following commentary from Wolf Richter…
Healthy big banks would get over Brexit and the political turmoil it is spawning, particularly non-UK banks. But there are no healthy big banks in Europe. And non-UK banks are crashing just as hard, and some harder. This is about a banking crisis morphing into a financial crisis.
These bank stocks got crushed on Friday. And they got crushed again today. Italian banks have been reduced to penny stocks. Spanish banks are getting closer. Commerzbank, Germany’s second largest bank, and still partially owned by the German government as a consequence of the last bailout, is well on the way.
One institution that I have been warning about for months is German banking giant Deutsche Bank. On Monday, their stock fell another 5.77 percent to a fresh all-time closing low of 13.87. I have been convinced that Deutsche Bank is going to zero for a long time, but these days it seems in quite a hurry to get there.
Of course Deutsche Bank is far from alone. The following are other “too big to fail” European banks that have lost at least one-fifth of their value over the past two trading days…
-Royal Bank of Scotland
-Lloyds Banking Group
-Banca Monte dei Paschi di Siena
The Brexit contagion is spreading as USD liquidity and counterparty risk in the interconnected global financial system has reached US banks with Goldman at 3 year lows and BofA and Citi plunging over 12%. This happens just two days after the Fed released its latest stress test results finding that none of the 33 banks tested would need additional capital in case of a “severe” financial crisis. That conclusion may be tested soon.
Meanwhile, the British pound continues to get absolutely pummeled. As I write this, the GBP/USD is down to 1.32, and some are now warning that the British pound may hit parity with the U.S. dollar by the end of the year.
One of the reasons why I expect the British pound to continue to tumble is because the global elite have to show the British people that they made the wrong decision, and they need to scare off any other countries that would consider holding similar votes.
Two major rating agencies downgraded the United Kingdom’s credit rating on Monday.
S&P Global Ratings lowered the UK to AA from AAA, with a “negative” outlook. And, Fitch cut its rating to AA from AA+, with a negative outlook as well.
And as I mentioned yesterday, Bank of America and Goldman Sachs have already projected that the UK economy is heading into recession.
As much economic and financial pain as possible will be inflicted upon the British people, and meanwhile they will be bombarded by mainstream news stories telling them that they made a stupid decision.
Hopefully the British people will stand strong and will not give in to the pressure.
But of course it isn’t just the British people that will be feeling the pain. The Brexit vote has sent shockwaves all over the planet, and global investors are losing tremendous amounts of money. For instance, here in the United States approximately 1.3 trillion dollars of stock market wealth has been wiped out so far…
Brexit isn’t just a European problem after all. The United Kingdom’s decision to quit the European Union is costing U.S. investors a pretty penny.
U.S.-based companies in the broad Russell 3000, including online advertising company Alphabet (GOOGL), software maker Microsoft (MSFT) and global bank JPMorgan Chase (JPM), have suffered a collective loss of $1.3 trillion since Friday’s shocker from the United Kingdom, according to a USA TODAY analysis of data from S&P Global Market Intelligence.
Hopefully tomorrow will be better. It is very rare for global financial markets to crash for three days in a row, but it could happen. More likely, however, is that we will see some kind of temporary bounce as long as some really negative event doesn’t hit the news.
But let there be no doubt about what has just happened. The collapse of Lehman Brothers was the “trigger event” that really accelerated the crisis of 2008, and now it appears as though the Brexit vote will be the “trigger event” that greatly accelerates the crisis of 2016.
Global investors had already lost trillions over the past 12 months, and a full-blown financial implosion was going to happen no matter how the vote turned out, but thanks to British voters the fun and games have arrived early.
Unfortunately, only a very small fraction of the population understands just how bad things are going to get in the months ahead…
More stock market wealth was lost on Friday than on any other day in world history. As you will see below, global investors lost two trillion dollars on the day following the Brexit vote. And remember, this is on top of the trillions that global investors have already lost over the past 12 months. It is important to understand that the Brexit vote was not the beginning of a new crisis – it has simply accelerated a global financial crisis that started last year and that was already in the process of unfolding. As I noted on Friday, we have been waiting for “the next Lehman Brothers moment” that would really unleash fear and panic globally, and now we have it. The next six months should be absolutely fascinating to watch.
According to CNBC, the total amount of money lost on global stock markets on Friday surpassed anything that we had ever seen before, and that includes the darkest days of the financial crisis of 2008…
Worldwide markets hemorrhaged more than $2 trillion in paper wealth on Friday, according to data from S&P Global, the worst on record. For context, that figure eclipsed the whipsaw trading sessions of the 2008 financial crisis, according to S&P analyst Howard Silverblatt.
The prior one day sell-off record was $1.9 trillion back in September of 2008, Silverblatt noted. According to S&P’s Broad Market Index, combined market capitalization is currently worth nearly $42 trillion.
And of course many of the wealthiest individuals on the planet got absolutely hammered. According to Bloomberg, the 400 richest people in the world lost a total of $127.4 billion dollars on Friday…
The world’s 400 richest people lost $127.4 billion Friday as global equity markets reeled from the news that British voters elected to leave the European Union. The billionaires lost 3.2 percent of their total net worth, bringing the combined sum to $3.9 trillion, according to the Bloomberg Billionaires Index. The biggest decline belonged to Europe’s richest person, Amancio Ortega, who lost more than $6 billion, while nine others dropped more than $1 billion, including Bill Gates, Jeff Bezos and Gerald Cavendish Grosvenor, the wealthiest person in the U.K.
Could you imagine losing a billion dollars on a single day?
I am sure that Bill Gates and Jeff Bezos are not shivering in their boots quite yet, but what if the markets keep on bleeding like they did in 2008?
On the other hand, globalist magnate George Soros made a ton of money on Friday because he had positioned himself for a Brexit ahead of time. The following comes from the London Independent…
The billionaire who predicted Brexit would bring about “Black Friday” and a crisis for the finances of ordinary people appears to have profited hugely from the UK’s surprise exit from the EU.
George Soros is widely known as the man who “broke” the Bank of England in 1992, when he bet against the pound and made a reported £1.5bn.
Although the exact amount Mr Soros has gained after Brexit is not known, public filings show he doubled his bets earlier this year that stocks would fall.
So what will happen on Monday when the markets reopen?
Personally, I don’t think that it will be as bad as Friday.
But I could be wrong.
In early trading, Dow futures, S&P 500 futures and Nasdaq futures are all down…
Dow futures fell by 90 points in early trading, while S&P 500 futures slipped 11 points, and NASDAQ futures dipped 24 points. Gold futures rose, in a reflection of sustained demand for safe-haven assets.
And at this moment, the British pound is getting absolutely crushed. It is down to 1.33, and I would expect to see it fall a lot lower in the weeks and months to come.
Well, the truth is that now that the British people have voted to leave the EU, the globalists have to make it as painful as possible on them in order to send a warning to other nations that may consider leaving. I think that a recent article by W. Ben Hunt explained this very well…
What’s next? From a game theory perspective, the EU and ECB need to crush the UK. It’s like the Greek debt negotiations … it was never about Greece, it was always about sending a signal that dissent and departure will not be tolerated to the countries that matter to the survival of the Eurozone (France, Italy, maybe Spain). Now they (and by “they” I mean the status quo politicians throughout the EU, not just Germany) are going to send that same signal to the same countries by hurting the UK any way they can, creating a Narrative that it’s economic death to leave the EU, much less the Eurozone. It’s not spite. It’s purely rational. It’s the smart move.
The elite need a crisis now in order to show everyone that globalism is the answer and not the problem. If the British people were allowed to thrive once they walked away, that would only encourage more countries to go down the exact same path. This is something that the elite are determined to avoid.
The Brexit vote has barely sunk in, and Bank of America and Goldman Sachs are already projecting a recession for the United Kingdom. Sadly, I believe that this is what we will see happen.
But it won’t just be the British that suffer.
On Friday, European banking stocks had their worst day ever. In particular, Deutsche Bank fell an astounding 17.49 percent to an all-time record closing low of 14.72. I have warned repeatedly about the implosion of Deutsche Bank, and this crisis could be the catalyst for it.
Last week, market tumult stemming from the U.K.’s vote to quit the European Union drove the British pound to its weakest levels in three decades.
Yet it also sent investors flocking to traditional safe haven assets like the U.S. dollar, gold and the yen, the latter surging against every major currency as the results of Brexit became clear: Dollar/yen spiked from a Thursday high near 107 to a two-year low near 99.
Just like in 2008, there will be days when global markets will be green. When that happens, it will not mean that the crisis is over.
If you follow my work closely, then you know that it is imperative to look at the bigger picture. Over the past 12 months, there have been some very nice market rallies around the world, but investors have still lost trillions of dollars overall.
What happens on any one particular day is not the story. Rather, the key is to focus on the long-term trends.
And without a doubt, this Brexit vote could be “the tipping point” that greatly accelerates our ongoing woes…
“Brexit is the biggest global monetary shock since 2008,” said David Beckworth, a scholar at the Mercatus Center at George Mason University, in a blog post on Friday. “This could be the tipping point that turns the existing global slowdown of 2016 into a global recession.”
We were already dealing with a new global economic crisis without the Brexit vote. But what this does is it introduces an element of panic and fear that had been missing up until this current time.
And markets do not like panic and fear very much. In general, markets tend to go up when things are calm and predictable, and they tend to go down when chaos reigns.
Unfortunately, I believe that we are going to see quite a bit more chaos for the rest of 2016, and the trillions that were lost on Friday may turn out to be just the tip of the iceberg.
Why is George Soros selling stocks, buying gold and making “a series of big, bearish investments”? If things stay relatively stable like they are right now, these moves will likely cost George Soros a tremendous amount of money. But if a major financial crisis is imminent, he stands to make obscene returns. So does George Soros know something that the rest of us do not? Could it be possible that he has spent too much time reading websites such as The Economic Collapse Blog? What are we to make of all of this?
The recent trading moves that Soros has made are so big and so bearish that they have even gotten the attention of the Wall Street Journal…
Worried about the outlook for the global economy and concerned that large market shifts may be at hand, the billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.
Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners, anticipating weakness in various markets. Investors often view gold as a haven during times of turmoil.
Hmmm – it sounds suspiciously like George Soros and Michael Snyder are on the exact same page as far as what is about to happen to the global economy.
You know that it is very late in the game when that starts happening…
One thing that George Soros is particularly concerned about that I haven’t been talking a lot about yet is the upcoming Brexit vote. If the United Kingdom leaves the EU (and hopefully they will), the short-term consequences for the European economy could potentially be absolutely catastrophic…
Mr. Soros also argues that there remains a good chance the European Union will collapse under the weight of the migration crisis, continuing challenges in Greece and a potential exit by the United Kingdom from the EU.
“If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable,” he said.
The Brexit vote will be held two weeks from today on June 23rd, and we shall be watching to see what happens.
But Soros is not just concerned about a potential Brexit. The economic slowdown in China also has him very worried, and so he has directed his firm to make extremely bearish wagers.
According to the Wall Street Journal, the last time Soros made these kinds of bearish moves was back in 2007, and it resulted in more than a billion dollars of gains for his company.
After 73 consecutive months of year-over-year growth, online jobs postings have been in decline since February. May was by far the worst month since January 2009, down 285k from April and down 552k from a year ago.
That may seem counterintuitive in an industry that has been rapidly shedding workers, with more than 350,000 people laid off in the oil and gas industry worldwide.
Texas is one place feeling the pain. Around 99,000 direct and indirect jobs in the Lone Star state have been eliminated since prices collapsed two years ago, or about one third of the entire industry. In April alone there were about 6,300 people in oil and gas and supporting services that were handed pink slips. Employment in Texas’ oil sector is close to levels not seen since the aftermath of the financial crisis in 2009. “We’re still losing big chunks of jobs with each passing month,” Karr Ingham, an Amarillo-based economist, told The Houston Chronicle.
At this point it is so obvious that we have entered a new economic downturn that I don’t know how anyone can possibly deny it any longer.
Unfortunately, the reality of what is happening has not sunk in with the general population yet.
American taxpayers are quick to criticize the federal government for its ever-increasing national debt, but a new study released Wednesday found taxpayers are also saddled with debt, and are likely to end 2016 with a record high $1 trillion in outstanding balances.
Wallethub, a site that recommends credit cards based on consumers’ needs, said that will be the highest amount of credit card debt on record, surpassing even the years during and before the Great Recession. The site said the record high was in 2008, when people owed $984.2 billion on their credit cards.
Will we ever learn?
This has got to be one of the worst possible times to be going into credit card debt.
Sadly, the “dumb money” will continue to act dumb and the “smart money” (such as George Soros) will continue to quietly position themselves to take advantage of the crisis that is already starting to unfold.
We can’t change what is happening to the economy, but we do have control over the choices that we make.
So I urge you to please make your choices wisely.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
You are about to see more very clear evidence that a new economic crisis has already begun. During economic recoveries, business debt delinquencies generally fall, and during times of economic recession business debt delinquencies generally rise. In fact, you will see below that business debt delinquencies shot up dramatically just prior to the last two recessions, and the exact same thing is happening again right now. In 2008, business debt delinquencies increased at a very frightening pace just before Lehman Brothers collapsed, and this was a very clear sign that big trouble was ahead. Unfortunately for us, in 2016 business debt delinquencies have already shot up above the level they were sitting at just before the collapse of Lehman Brothers, and every time debt delinquencies have ever gotten this high the U.S. economy has always fallen into recession.
In article after article, I have shown that key indicators for the U.S. economy started falling in either late 2014 or at some point during 2015. Well, business debt delinquencies are another example of this phenomenon. According to Wolf Richter, business debt delinquencies have shot up an astounding 137 percent since the fourth quarter of 2014…
Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.
Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion.
And we never see this kind of rise unless the U.S. economy is heading into a recession. Here is more from Wolf Richter…
Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:
Business loan delinquencies are a leading indicator of big economic trouble.
To me, this couldn’t be any clearer.
Just like the U.S. government and just like U.S. consumers, U.S. businesses are absolutely drowning in debt.
In fact, a report that was just released found that debt at U.S. companies has been growing at a pace that is 50 times faster than the rate that cash has been growing.
Now that the early chapters of the “next crisis” are here, most American families find themselves ill-equipped to deal with another major downturn. In fact, USA Today is reporting that approximately two-thirds of the country is currently living paycheck to paycheck…
Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll, a signal that despite years after the Great Recession, Americans’ finances remain precarious as ever.
These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.
What are these people going to do when they lose their jobs or their businesses go under?
If you have any doubt that the U.S. economy is already in recession mode, just look at this chart over and over.
For months, I have been warning that the same patterns that immediately preceded previous recessions were happening once again, and this rise in debt delinquencies is another striking example of this phenomenon.
This stuff isn’t complicated. Anyone that is willing to be honest with themselves should be able to see it. As a society, we have been making very, very bad decisions for a very, very long period of time, and what we are watching unfold right now are the inevitable consequences of those decisions.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
The full-blown economic collapse that is happening in Venezuela right now is a preview of what Americans will be experiencing in the not too distant future. Just a few years ago, most Venezuelans could never have imagined that food shortages would become so severe that people would literally hunt dogs and cats for food. But as you will see below, this is now taking place. Sadly, this is what the endgame of socialism looks like. When an all-powerful government is elevated far above all other institutions in society and radical leftists are given the keys to the kingdom, this is the result. Food shortages, looting and rampant violent crime have all become part of daily life in Venezuela, and we all need to watch as this unfolds very carefully, because similar scenarios will soon be playing out all over the planet.
The funny thing is that Venezuela actually has more “wealth” than most countries in the world. According to the CIA, Venezuela actually has more proven oil reserves than anyone else on the globe – including Saudi Arabia.
So how did such a wealthy nation find itself plunged into full-blown economic collapse so rapidly, and could a similar thing happen to us?
The president of Venezuela has declared a 60 day state of emergency in a desperate attempt to restore order, but most people don’t anticipate that it will do much good. Social order continues to unravel as the economy systematically implodes. The Venezuelan economy shrunk by 5.7 percent last year, and it is being projected that it will contract by another 8 percent in 2016. Meanwhile, inflation is raging wildly out of control. According to the IMF, the official inflation rate in Venezuela will be somewhere around 720 percent this year and 2,200 percent next year.
If people are able to get their hands on some money, they immediately rush out to the stores to use it before the prices go up again. This has created devastating shortages of food, basic supplies and medicine.
Electricity is also in short supply, and a two day workweek has been imposed on many government employees in a desperate attempt to save power. Violent crime is seemingly everywhere, and most law-abiding Venezuelans lock themselves in their homes at night as a result.
Much of the crime is being perpetrated by the mafia and the gangs, but sometimes it is just normal people looking for food. Desperate people do desperate things, and according to the Guardian there have been “107 episodes of looting or attempted looting in the first quarter of 2016″…
Crowds of people in Venezuela have stolen flour, chicken and even underwear this week as looting increases across the country in the wake of shortages of many basic products. Many people have adopted the habit of getting up in the dead of night to spend hours in long lines in front of supermarkets. But as more end up empty-handed and black market prices soar, plundering is rising in Venezuela, an Opec nation that was already one of the world’s most violent countries.
There is no official data, but the Venezuelan Observatory for Social Conflict, a rights group, have reported 107 episodes of looting or attempted looting in the first quarter of 2016. Videos of crowds breaking into shops, swarming on to trucks or fighting over products frequently make the rounds on social media, though footage is often hard to confirm.
Other Venezuelans have resorted to digging in dumpsters and trash cans for food. This many seem detestable to many Americans, but when you are desperately hungry you may be surprised at what you are willing to do.
Ramón Muchacho, Mayor of Chacao in Caracas, said the streets of the capital of Venezuela are filled with people killing animals for food.
Through Twitter, Muchacho reported that in Venezuela, it is a “painful reality” that people “hunt cats, dogs and pigeons” to ease their hunger.
You may be tempted to dismiss these people as “barbarians”, but someday Americans will be doing the exact same thing.
There has been a breakdown of basic social services in Venezuela as well. Acute shortages of drugs and medical supplies are having absolutely tragic results. When I read the following from the New York Times, this crisis in Venezuela become much more real to me…
By morning, three newborns were already dead.
The day had begun with the usual hazards: chronic shortages of antibiotics, intravenous solutions, even food. Then a blackout swept over the city, shutting down the respirators in the maternity ward.
Doctors kept ailing infants alive by pumping air into their lungs by hand for hours. By nightfall, four more newborns had died.
So once again I ask – how did such a thing happen to such a wealthy nation?
The real culprit is chavismo, the ruling philosophy named for Chavez and carried forward by Maduro, and its truly breathtaking propensity for mismanagement (the government plowed state money arbitrarily into foolish investments); institutional destruction (as Chavez and then Maduro became more authoritarian and crippled the country’s democratic institutions); nonsense policy-making (like price and currency controls); and plain thievery (as corruption has proliferated among unaccountable officials and their friends and families).
Are not the same things happening here?
The U.S. government is mismanaging our money too. During Barack Obama’s eight years in the White House, the U.S. national debt has risen by more than eight trillion dollars. We waste money in some of the most bizarre ways imaginable, and at this point our national debt is nearly the double the size it was just prior to the last major financial crisis.
Institutional destruction is also a legacy of the Obama regime. With each passing day, our society resembles the Republic that our founders originally intended less and less, and it resembles socialist dictatorships more and more. We may as well not even have a Constitution anymore, because at this point nobody really follows it.
The third thing that Business Insider mentioned, “nonsense policy-making”, is a perfect description of what has been going on in Washington D.C. these days. Perhaps that is why Congress only has a 12.8 percent approval rating right now.
Lastly, thievery and corruption are also out of control in our nation too. The elite and special interest groups spend massive amounts of money to get their favorites into office, and in turn those politicians shower their good friends with money and favors. It is a very sick relationship, but that is how our system now works.
We are sitting on the largest mountain of debt in the history of the planet, and our debt-fueled prosperity is completely dependent on the rest of the world lending us gigantic amounts of money at ridiculously low interest rates and continuing to use our increasingly shaky currency which we are debasing at a staggering pace.
We consume far more than we produce, and unlike Venezuela we aren’t sitting on hundreds of billions of barrels of oil. The amount of “real wealth” that we actually have does not justify our current standard of living. The only way that we are able to live the way that we do is by stealing consumption from the future. One study has found that our debt level is the highest that it has been since the Great Depression of the 1930s, and yet we continue to race down this road to economic oblivion without even thinking twice about it.
What you sow is what you will reap.
And just like Venezuela, America will ultimately reap a very bitter harvest.